Jonathan Halkyard: Shaun, it’s Jonathan. We agree. We think both in the Las Vegas market and in the regional markets when adjusting for the impact of the cyber incident whether you look at it year-over-year or sequentially from the second quarter to the third quarter that our margins were flat to up in those comparisons. The impact in Las Vegas on margins was about 200 basis points. There was some impact from the accrual in the third quarter that I mentioned related to anticipated increases in labor costs. So when correcting for those, the margin. I thought the margin performance year-over-year and sequentially was pretty good. The regions, the margin impact from the cybersecurity incident was less severe, it’s less than 100 basis points.
For a number of reasons. But even with that modest adjustment, you can see that our margins in the low 30s compared pretty well, both sequentially and year-over-year despite some continued labor cost increases in the regions and actually some more labor content in that business.
Shaun Kelley: Great. As my follow-up, just quickly, if I could. We’ve heard more and more about just promotional levels picking up a bit in Macau. And I was wondering if yourselves are, I don’t know if Hubert’s on the line or somebody could comment a little bit more on just what you’re seeing over there? It seems like based on the share number you disclosed for October and what you talked about, Bill, in the prepared remarks, you guys are doing really well there. But just you talk about that competitive climate a little bit and maybe the margin structure around the really highest end part of premium mass, that would be helpful?
William Hornbuckle: Hubert, since we have you up, why don’t we kick it to you.
Hubert Wang: Sure. Thank you, Bill. Yes. Shaun, I think for the most part, the marketing programs, promotion programs in the market remain pretty rational. We haven’t seen irrational behavior among all the operators. And in terms of our own reinvestment, it stays pretty stable quarter after quarter even at the premium mass level. So that’s what I see in general. There are a lot of concerts and events that draw a lot of people into the town. And I think that from that perspective, it’s incremental to the not only to the market but also to us as well. So I leave it at that.
Operator: The next question is from David Katz with Jefferies. Please go ahead.
David Katz: Hi afternoon. Thanks for taking my question. I wanted to just talk about updated thoughts on leverage on a lease adjusted basis and how you think about that in the context of returning capital. We just have many discussions with management teams about where they’d like to be, whether it’s three to four, four plus in most cases, lower — some cases, lower than that. And I would just love your perspective?
Jonathan Halkyard: Sure. It’s Jonathan. And I appreciate the question. It’s something we think about a great deal right now on a lease-adjusted basis, suggesting the lease payments by a multiple of 8x. Our leverage is about three and a half times. It’s a full turn below what we’ve talked about as our leverage cap. So a full turn on EBITDAR for us is over $4 billion. We have zero net debt right now. We’ve been aggressive repurchases of shares. I will say that at these levels of trading in our shares and the value that we think is in there. We would certainly consider taking on some additional financial leverage in order to enable further share repurchases. . Now we have to be mindful, of course, of some of the investments that we have coming up in ’24, including in Japan, potentially in New York, depending upon timing.
But we feel very comfortable with the leverage levels that we are at and going to that higher level. And one more reason is just because of, we think, the increased diversification of our cash flows and the resiliency of the revenues that we’ve seen here.
David Katz: Understood. And if I can, just as my follow-up, we also have a number of discussions with management teams around how they’re thinking about dividends among your peers and how they should be sized and their importance and relevance. And I’d love your thoughts there, too.
Jonathan Halkyard: Yes. We’ve made — and our Board has made the determination that at least for the time being, and I think probably into 2024 that that returning cash to our shareholders through share repurchases is going to be the predominant method of doing that. And that’s the best way for us to do it right now as opposed to the dividends. So I don’t expect to see our dividend policy changing in the next — certainly in the next 12 months. But the Board will ultimately.
Operator: The next question is from Dan Politzer with Wells Fargo. Please go ahead.
Daniel Politzer: First, just following the cyber-security incident in the quarter, any updated way to think about investments in your IT infrastructure or OpEx related to this as we think about next year? And then just as a follow-up along with that cost structure. I mean, other than the labor uptick, are there any other costs that we should be thinking about that you guys plan to offset for next year, whether it’s property insurance or anything else that we should be aware of?
William Hornbuckle: Dan, let me kick it off. As it relates to the — obviously, we’ve done a whole lot to lock down systems now. But we’re going to look at architecture and how we’re designed and how we go forward. And so we’re probably looking at sometime into next year a $30 million or $40 million capitalization. In terms of IT hardware and Cap that goes into it. In terms of OpEx, while there are things to do, I don’t know that they’re overly meaningful. A lot of that will get captured by CapEx, but is that 20? — 10% to 20% range in terms of operating. The capital we’ll find in the general fund, we generally go around $800 million a year to keep this place fresh, and we’ve got a couple of big remodels next year. So that’s not expected to change that greatly.
Obviously, the wage increase that is being talked about now with the culinary, Ultimately, I think you all know we’re in strike in Detroit, which is a similar program and similar request I might add. In terms of the percentage, we’ll be in play insurance will be in play. Those are probably the two biggest things in terms of a percentage. But even the insurance, cyber and otherwise, well, it has continued to go up and is a staggering thing for you to understand since ’19 — Las Vegas insurance has gone up twofold. And since ’19, it’s gone up fourfold since in our regional casinos. So it’s something we watch closely. But the overall number and the scale of what we’re talking about is still pretty de minimis, and we think we can overcome it, particularly here in Las Vegas.
Daniel Politzer: Got it. That’s helpful. And then — just turning bigger picture and longer term, I guess, as you think about Dubai, I mean, do you see a realistic path to getting game legalized there? And then along with that, if there’s any way to obviously have the rendering in the back of the deck, but any way to think about timing, CapEx, ownership structure or path to full ownership, just high level would be helpful?
